The US dollar has surged to its highest level in over two years, following indications from the Federal Reserve about a potential slowdown in monetary easing next year. Bloomberg reports that the Bloomberg Dollar Spot Index climbed 0.6% on Wednesday, marking a peak not seen since 2022. The dollar has gained approximately 7% throughout the year, suggesting it may conclude 2024 with its strongest performance since 2015.

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The rally has been amplified by President-elect Donald Trump’s pledge to implement stringent tariffs on multiple U.S. trading partners, adding momentum as the Federal Reserve deliberates the trajectory of interest-rate reductions. The U.S. economy’s robust performance relative to other countries further supports the dollar’s ascent.

Contrastingly, global central banks are compelled to drastically cut borrowing costs to counter stagnant economic growth. Brendan McKenna, a foreign-exchange strategist at Wells Fargo, projects that the dollar could rise by 5% to 6% on average against the Group-of-10 currencies next year as disparities in monetary policy become more pronounced.

IndexBox data complements this outlook, underscoring the dollar’s potential to impact international trade dynamics significantly. Wall Street strategists predict that although the dollar might reach its zenith by mid-2025, it is likely to decline thereafter as global interest rate cuts rejuvenate economic expansion outside the U.S.

Source: IndexBox Market Intelligence Platform